When learning new things, we tend to depend on others despite having the knowledge, resources and tools. Unless we have a proven system in place, we are bound to fail. This is the same with the Forex market. Whether we make money or not depends on the brokers we choose. Here are 7 essential tips on how to choose Forex brokers.
This is definitely the most important requirement from the broker you choose.
Every broker can claim him or her to be the best. But unless he or she have relevant qualifications with certified Forex Trading academies or schools, do not engage him or her. Also make sure the certificates are genuine and not from photoshop which anybody can copy and print online these days.
This is to protect yourself and your money from unethical trading practices and scams that may arise even if the broker is recommended by your family and friends.
The second thing to consider is whether the broker is regulated with the respective Forex firms to do what he is supposed to do.
If you have to, call those firms or companies that the broker is affiliated with for vertification. Do not just call from namecards as the company stated may not be what it really is.
Simply go to the official company site and contact the relevant person by phone or email.
3. Business Model
The third thing to consider is what business model the broker use.
Some brokers are market makers while others are ECN brokers providing dealing desks for numerous traders.
4. Examine The Types Of Spreads They Offer
In case you do not know what spreads are, they are the differences between the bid and asking prices of the currency you trade in.
Brokers no longer earn commissions from your trade. Instead they take the spreads as their commissions.
They usually offer fixed or variable spreads which are different for large and small accounts.
They should be able to provide you with details of what slippage they would expect whether the market is slow, normal or moving fast.
6. Margin Requirements
Another thing you should find out is their margin requirements.
Meaning what is the percentage of the investment do they expect you to pay to open a trade?
Other than requirements, you should also ask their margin calls and the time you need to respond to them.
7. Rollover Policy
Last but not least, ask them about their rollover policy.
Do they have any minimum margin requirements which they use to earn interest on any overnight positions?
Other than those, do they have any other conditions pertaining to you earning interest on any rollovers?
Once you have done your research and selected the broker you want, it is time to set up your trading account and start trading.
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